| A Finance Act 2026 agenda |
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| If Simon Harris and his Departmental officials are looking for a series of win-win, uncontroversial, and potentially enhancing reforms for Ireland’s national economic interest the proposals offered across the seven topics in this month’s Tax Monitor, starting with long overdue Section 110 reforms are there for the implementation. |
Amongst the most implementable recommendations this month are Angela Fleming’s on Section 110 (a clear, long-unresolved injustice needing a fix), Ellen Ford’s on SME compliance, and Ian Clarke’s transfer pricing warning (an alert against expanding burdens). Deirdre Barnicle’s thread across 3 of the questions highlights the tension between international frameworks and Ireland’s open-economy model. It’s a theme indeed that runs through the entire discussion, and sits in the background as Ireland assumes the EU Presidency on July 1st.
In respect to Section 110, Fleming’s most pressing point is the long-standing unresolved issue of the treatment of foreign withholding taxes for Section 110 vehicles. The current Revenue approach effectively taxes income S110 companies never fully receive, breaching the regime’s policy intent of tax neutrality. The technical formula used (P*I/R) produces near-zero credits for SPVs with minimal profits. Her solution - allow a full deduction for foreign withholding tax - is well-grounded. She also flags the disproportionate consequences of minor, inadvertent breaches of qualifying criteria, such as missing the 8-week notification window.
On Foreign Tax Credit Rules Fleming highlights that Schedule 24 rules are unnecessarily complex. A key point of hers is that different income types - interest, royalties - are treated differently under pooling relief rules, creating confusion. She calls for a single, unified set of rules across all trading income, plus the ability to carry forward excess foreign tax credits or deduct them in the current year. This is an example of where economics can aid simplification of our tax code.
In relation to the OECD’s M&A Side-by-Side Package Deirdre Barnicle, (McCann Fitzgerald) welcomes the OECD’s Simplified ETR Safe Harbour, which eases the Pillar Two administrative burden on multinationals. One of her observations concerns the substance-based tax incentive safe harbour, which she sees as an opportunity for Ireland - allowing companies to benefit from tax incentives provided they have economic substance in the country.
On the Side-by-Side system (see opposite) she sounds a note of caution pointing out that its real impact on Ireland is hard to judge, and that a 2029 review will be needed.
On the Transfer Pricing question in this month’s Monitor BDO’s Ian Clarke, also sounds a note of caution. He warns against extending transfer pricing rules to medium-sized enterprises, arguing this would burden companies least equipped to handle it. He also wants Ireland to maintain its relatively high €250m revenue threshold for Masterfile preparation.
More positively, he urges Ireland to unilaterally accept the OECD Amount B safe harbour for qualifying Irish distributors, which would reduce compliance costs for routine distributors. He also calls for active Irish engagement in the OECD’s revision of intragroup services guidelines — a significant practical concern given how central services transactions are.
In relation to EU Taxation of Financial Services Barnicle notes that 91 sector-specific taxes have emerged across the EU due to fragmented financial services VAT treatment - a striking figure that underlines the scale of the problem. Her key observation is political: meaningful reform requires unanimous member state approval under the Lisbon Treaty, it being a tax matter - a vital interest of Ireland - and the European Commission is consequently seen as reluctant to push it, having recently dropped the financial transaction tax from its work programme. She suggests cost-of-living concerns may be making member states wary of adding to consumer costs. The core message: structural reform is needed but politically an imaginative approach will be needed that does not threaten an essential element of the Lisbon Treaty.
Regarding Tax Simplification for SMEs Laura Ellen Ford, (Eversheds Sutherland) offers a wide-ranging response. A major issue is the burden of the Form CT1 — a 60+ page document not tailored to small businesses. She argues for a simplified version that filters out irrelevant sections. On close company rules, she calls for raising the surcharge de minimis threshold from €2,000 to €5,000, and abolishing the close service company surcharge, which she describes as outdated and unfairly penal on professionals such as doctors and engineers. Her point about Enhanced Reporting Requirements - where even minor staff perks must be pre-reported - resonates as an example of rules designed for large corporates being poorly applied to small businesses. In relation to ILPs Deirdre Barnicle welcomes the Finance Act 2025 dividend withholding tax exemption but identifies a significant problem in that the Outbound Payment Rules apply uniformly, effectively cancelling out the benefit for ILPs. Since ILPs are already regulated by the Central Bank of Ireland, she argues a more targeted anti-avoidance provision specific to ILPs would preserve compliance commitments while allowing the exemption to work as intended. |
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